A cursory look into the more than 104,000 Paycheck Protection Program loans that were approved for Colorado companies reveals a wealth of data but few insights. 

The Small Business Administration program, part of the Coronavirus Aid, Relief, and Economic Security Act, was signed into law on March 27, with $349 billion in funding. According to The Washington Post, 4.7 million companies received those loans. The SBA reported the average loan size for the entire program at $107,000. 

In Colorado, 13,383 companies got loans of $150,000 or more. Another 91,000 got loans ranging from $44 to $149,995. More than 84,000 of those loans were for less than $100,000. Those companies ranged from those with single owners to multi-million-dollar businesses with thousands of employees that few would think of as a small business.

But for all the money that has been put into the program, it couldn’t put to rest some critical questions: Do we really know how many jobs were saved? Did companies get their fair share? And the billion-dollar question: Is it enough to save the economy? Colorado Politics talked to recipients, lenders and experts about the program and where we go from here.

The program’s purpose is to help small businesses – defined by the SBA as 500 employees or less – keep employees on the payroll. Under the initial program rules, 75% had to be spent on payroll in order to have the loan forgiven, but that amount was later reduced to 60%. If less than 60% is used for payroll, under the rules adopted by Congress in June, businesses would have up to five years to pay it back. Loans were to be based on 2½ times the monthly payroll. The rest could be used for rent and utilities, according to program rules.

The Trump administration claimed the program would save 51 million jobs. 

Questions about the program’s efficacy and accuracy have dogged PPP from the start. Initially, businesses had two months to spend the money, primarily for payroll. But for the Colorado businesses with loans approved prior to June 5, the day President Trump signed a revision that extended the spending time to six months, that money was long gone by June 5.

Out of the Colorado businesses that saw loans approved for $150,000 or more, only 140 had approval dates of June 5 or later. Of the businesses that had loans approved for less than $150,000, 84,841 got those loans before June 5.

The pandemic isn’t over for Colorado businesses, and many have reopened to far less than full capacity, or in the cases of bars and breweries, not at all. That’s led some business owners to say that while the program helped, it didn’t help enough, and employees could still be laid off and the businesses could still end up closing.

Limited transparency

For the program’s first several months, the Trump administration refused to disclose who got loans and for how much. A coalition of media organizations, including the Washington Post and ProPublica, sued for that information. That lawsuit is ongoing.

On July 6, the SBA released two databases:  Loans of less than $150,000 were disclosed with industry information, the dates the loan were approved and the exact amount of the loan, but didn’t identify the companies that got them.

For companies that got loans of $150,000 or more, a second database listed names and industries but instead of a specific dollar amount, it listed a range, such as $350,000 to $1 million, or $1 million to $2 million.

The Small Business Administration said the loan amounts listed were for approved loans, not necessarily funds that had been disbursed.

And while the database included information on minority ownership, the number of jobs that could be retained and other demographic information, the SBA said in a document accompanying the database’s release that about “75% of all PPP loans did not include any demographic information because that information was not provided by the borrowers. 

“SBA is working to collect more demographic information from borrowers to better understand which small businesses are benefiting from PPP loans. The loan forgiveness application expressly requests demographic information for borrowers.”

A rough start

Tony Gagliardi, state director for the Colorado chapter of the National Federation of Independent Business, said his member’s average size is between five and nine employees and with average sales of $500,000 or less.

“The rollout was abysmal,” Gagliardi said, which led to questions about “whether anyone was thinking about an official way” to run the program at its onset.

“Most of our members got left out of the first round,” Gagliardi said, with problems such as not being able to get lenders to call them back, or follow-up on whether they would get a loan.

Once that initial phase was over, things went a little smoother.

But the program missed its mark, he explained. “Those who really needed it didn’t have access, and those who didn’t got a gift.”

Many businesses were under the gun to figure out if workers would come back to work and how to manage cash flow in the eight weeks the program set forth for the forgiveness part of the program. It did help some small businesses, he said.

But the business hasn’t come back for many. Orders aren’t coming in as fast as was hoped for, Gagliardi said, and that could mean even businesses that took loans could still be facing layoffs and the threat of going under.

“It was such a complicated program from the start. We had to do something, and do it fast, but a little more thought should have gone into it,” he said.

A trio of New York restaurateurs, writing for The Atlantic in April, said “the PPP is a Band-Aid for a wound that needs surgery. What happens after the eight weeks are up and the PPP funds have been used to pay employees but sales haven’t returned to a healthy level? Businesses will have no other choice but to significantly cut employees’ hours or entirely terminate them to stay afloat. Restaurants won’t have enough sales to justify the staff the government wants them to protect.”

Michael Sudak owns Michael’s of Denver Catering, which has been in business for 23 years. The main business is My Kid’s Lunch, which provides “healthy alternative” food service for schools, daycares and mental health clinics. The family-owned business does 100 deliveries a day with its 65 full and part-time employees, including delivery drivers, chefs and everything in-between.

When schools first closed in March, Sudak told Colorado Politics that at the end of one week he could only schedule seven staff out of 65. He advised the rest to get on unemployment as soon as possible, but promised he would do all he could to bring them back. 

After that, the company began working with emergency food service programs for nonprofits that provide food to school students, programs that usually operate during the summer. Within four weeks he was able to bring back 30 people. In April and May they were up to 40% of the normal volume, and that’s continued into the summer, which is higher than usual. “We’re doing well but still only have 36 employees” on the payroll, roughly half the normal crew.

The PPP loan helped a lot, according to Sudak. “You were to spend it in eight weeks, which we did because we were in the first group to apply and get it,” Sudak said. Although they didn’t have the volume, the loan allowed them to bring back office staff and managers. For a lot of restaurants and food service companies, “If you handed them eight weeks of money for free they still couldn’t bring people back,” because they weren’t able to reopen. Being able to diversify into emergency meals allowed them to use the money in a timely fashion, and he said he expects to get that loan forgiven. Those who haven’t come back are still on unemployment, he added. 

Sudak still has questions about the future: what happens when schools reopen, whether they reopen, and how many days a week could they be open? 2020 could be his best year ever or his worst, Sudak said. “This isn’t sustainable. If I have another month like April or May, I’m losing money, but it’s not enough volume to cover my overhead. I may have to borrow money to stay in business.”

The question becomes whether the PPP loan helped or if it just put off the inevitable, he said.

Would another round of PPP funding work? “I’d jump on it.”

Vicky Simmons and Adrienne Pietrafso have owned John’s Towing in Aurora since 1981. The company has 24 employees. 

“We knew with the shutdown that there would be no way our business wouldn’t take a hit,” because people weren’t driving. Traffic went down to nothing. No accidents, no cars breaking down. One of their employees has been with them for 34 years, and they didn’t want to lay people off.

“We haven’t laid off one person. They’re like family to us” and the loan gave the employees peace of mind during those first two months,” Pietrafso said.

The loan gave them a cushion to hang onto employees, Pietrafso said. About 95% of the loan went to cover payroll for two months. As the state has reopened, business has picked up. But it’s definitely a hardship. “I can’t imagine what other businesses are doing” such as bars and gyms, Pietrafso said. They were able to defer some bills but all those expenses have continued to pile up. 

“We just hope they don’t shut things down again,” Pietrafso said. Even a partial shutdown will cause businesses on the brink to go over the edge, added Simmons. 

“It’s an eerie feeling when the phones aren’t ringing and the bills keep coming, especially when it’s so sudden. That was the worst part. When will it end, when will things get back to normal?” said Pietrafso. 

And then there’s the issue of personal protective equipment, which drivers needed to do business, and that was another expense. Sometimes the driver would give the motorist a ride home. “You can’t socially distance in a truck,” Pietrafso added.

Questions of accuracy

During the past two weeks, business owners have complained that the information in the database isn’t accurate.

In Colorado, two nail salons were identified as having received as much as $20 million in loans. The owner said they got less than $100,000.

Also called into question: reporting around how many employees stayed on the payroll. Nationwide, more than 500,000 businesses that got loans listed zero jobs saved or didn’t provide a number. In Colorado, 1,376 businesses of the 13,383 that were approved for loans of more than $150,000 reported zero jobs saved. For businesses that got the smaller loans, 16,200 Colorado businesses said the loan would not save any jobs. 

Some business owners claim they were never asked that question in the first place. And according to Reuters, some companies overestimated the number of jobs saved.

The flip-side of that claim: Many companies reported they saved exactly 500 jobs, the limit for a small business loan. The database listed 69 companies in Colorado with loans of more than $150,000 that reported that number. That included Bad Daddy’s, a franchise chain owned by Lakewood-based Good Times that operates in Colorado and six other states. Good Times also reported for one of its two loans that it would save exactly 500 jobs.

Among the unnamed businesses that got loans of less than $150,000, 10 reported that their loan would save 500 jobs each. Those loans ranged from $1,000 to $127,500. 

There’s another issue around accuracy, and that’s in verifying that the company actually exists.

For example, Black Sea Trucking of Aurora, listed with the US Department of Transportation as Father & Son Trucking, was approved for a loan on June 8 from Celtic Bank of Salt Lake City for between $150,000 to $350,000. According to its U.S. Department of Transportation records, the company “has no current for-hire operating authority” with the Federal Motor Carrier Safety Administration. 

The SBA database says the company is Hispanic-owned, yet according to the Colorado Secretary of State’s business database, the company is based at a home in Aurora and was owned by individuals with Russian surnames throughout its 15-year history, which includes numerous delinquent filings. The company has no website or known phone number. A call to a phone number listed for the homeowner, whose name was not the same as the one listed for the company, was not returned.

The SBA has said the banks are responsible for the accuracy of information on loans. 

When asked how they verify information from borrowers, Celtic Bank General Counsel Leslie Renaldi said in an email to Colorado Politics that “we are a small commercial bank and cannot individually respond to the number of inquiries we are receiving regarding the PPP Loan reports. Please note that PPP lenders did not create the PPP Loan reports. We have researched some of the data provided in the PPP Loan reports and have noted, and reported to the SBA and Treasury, numerous discrepancies. Our expectation is that new, corrected reports will be issued soon.”

Did loans go to small businesses?

That appears to depend on how they’re defined. Multi-million dollar companies, some publicly traded and with thousands of employees, got loans under the franchise model, which is based on the number of employees per location. That allowed those businesses to claim they fit under the SBA’s definition of a small business.

Good Times, which got two loans, has 2,535 employees, according to its website. The loans were estimated by the database at $2 million to $5 million each and that would save a total of 898 jobs.

Golden-based Boston Market reports a total of 14,000 employees in 450 locations in 28 states as of 2018. It claimed its two loans between $5 million and $10 million each would save 500 jobs. 

Negative publicity over loans going to companies the public doesn’t view as small businesses resulted in some companies returning the money, to the tune of about $30 billion. That included Shake Shack, Ruth’s Chris Steak House and the Los Angeles Lakers.

Treasury Secretary Steven Mnuchin said in April that companies that took more than $2 million in loans would be audited.

The bigger the business, the better its chances of getting a loan, according to Vox, which said “a program widely perceived as being meant to boost the United States’ most vulnerable small businesses ended up prioritizing businesses that aren’t actually that small.”

According to Colorado businesses listed in the $150,000-plus database, 8,184 went to businesses that claimed the loan would save between 1 and 50 jobs.

For businesses that got the smaller loans, 16,200 Colorado businesses said the loan would not save any jobs. More than 66,270 businesses said the loan would help them retain between 1 and 50 jobs. Another 9,000 businesses had no answer to that question.

It also didn’t work as well for minority-owned businesses. In Colorado, 226 businesses that received $150,000 or more were listed as minority-owned. And that’s for the few who got the loans. Forbes reported in May that just 12% of Black and Latino business owners who applied actually got loans.

Out of the 91,000 Colorado businesses with loans of less than $150,000, more than 11,000 didn’t answer the question. Of the remainder, 1,758 went to minority-owned businesses. Nearly 1,000 went to Latino/a-owned businesses.

As to gender, more than 9,500 businesses in the 150,000k-plus group didn’t say whether they were male-or-female owned. Of those that answered, 686 were women-owned; about 3,200 said they are owned by men.

According to the Wall Street Journal, those that got loans were more likely to have relationships with the banks that handled them, rather than based on the greatest need.

The SBA was ordered in the original CARES Act legislation to prioritize loans to rural and underserved markets. However, according to a May report from the SBA inspector general, the SBA failed to do that.

Church and state

By type of business: 919 nonprofits got loans of $150,000 or more. The largest loans, in the $5 million to $10 million range, went to hospital districts and nonprofit healthcare providers.

While they don’t pay taxes, churches cashed in on taxpayer-funded PPP loans, too. Churches and major religious organizations, some with ties to the president, took $7.3 billion through 88,411 PPP loans.

This included 10,000 Catholic churches.

In Colorado, the Archdiocese of Denver and the dioceses of Colorado Springs and Pueblo all got loans.

The Archdiocese of Denver scored big, with two loans for its Mount Olivet cemetery in Jefferson County. The Mount Olivet Cemetery Association got a loan ranging between $350,000 to $1 million, and claimed it would save 42 jobs. The mortuary at Mount Olivet got a loan of between $150,000 and $350,000, and claimed that would save 52 jobs.

The Archdiocese got three other loans: one for the archdiocese ($2 million to $5 million), another for its management operation ($1 million to $2 million) and a third for its co-located St. John Vianney seminary, of $350,000 to $1 million.

The loan to the Diocese of Colorado Springs was listed at between $350,000 and $1 million.

Another 40 Catholic churches or affiliated organizations, such as Catholic Charities, got loans. A total of 214 religious organizations in Colorado got loans through the program.

All about politics

The Associated Press reported that $273 million in loans went to 100 companies owned by President Trump’s donors. “Many were among the first to be approved for a loan in early April, when the administration was struggling to launch the lending program. And only eight businesses had to wait until early May before securing the aid, according to the AP’s review of data released Monday.”

However, the AP also reported that “there is no evidence the companies received favorable treatment as a result of their ties to Trump, and the businesses account for just a fraction of the overall spending under the program.”

Among political organizations with Colorado ties: America Rising Corporation, which is tied to the America Rising political action committee that launched the ethics investigation against former Gov. John Hickenlooper.

The corporation got a loan of between $350,000 and $1 million. The corporation used the loan to keep employees on the payroll, according to CEO Joe Pounder. The loan has already been paid back “with interest,” Pounder told The New York Times.

Another Pounder-owned company, Bullpen Strategy, also got a PPP loan of between $150,000 and $350.000. Pounder’s partner at Bullpen, Brian Rogers, formerly led America Rising Squared, a 501(c)4 dedicated to conservative principles. Rogers led the “outside coalition helping to confirm the last two Supreme Court Justices,” including Colorado’s Neil Gorsuch.

Republican Bryant “Corky” Messner is running against Democratic Sen. Jeanne Shaheen of New Hampshire in November, and the Denver branch of his law firm Messner Reeves was approved for a loan of between $2 million and $5 million. Messner Reeves also represents the Colorado Restaurant Association.

An analysis by Fortune showed that Democratic Rep. Diana DeGette’s 1st Congressional District got the third most loans of $150,000 or more in the U.S. Eight of the top 10 are districts represented by House Democrats.

Another round?

For all its faults, Congressional lawmakers believe more funding and tweaks to the program, are necessary.

Talk is underway in Congress for the third phase of PPP, which would allow businesses that have already spent their previous money to apply again. On June 18, three Senate Democrats – Sens. Ben Cardin of Maryland, Shaheen and Chris Coons of Delaware – introduced what’s known as the Prioritized Paycheck Protection Program (P4) Act (S.4014). A similar version was introduced the same day in the U.S. House. These bills would substantially tighten the lending requirements. The biggest change: businesses that qualify must employ 100 people or less, and the SBA is directed under the bill to prioritize loans to companies of 10 employees or less. 

According to the U.S. Senate Committee on Small Business & Entrepreneurship, “eligible businesses must have already expended an initial PPP loan, or be on pace to exhaust the funding, and must demonstrate a revenue loss of 50 percent or more due to the COVID-19 pandemic.” Publicly-traded companies would be ineligible, in response to complaints about those companies getting loans in the first two rounds. Funding would come from existing CARES Act dollars.

P4 could become part of a Phase Four bill currently under discussion in Congress, and President Trump said in early July that Mnuchin is working with Congress on that next round. While initially Senate Majority Leader Mitch McConnell of Kentucky opposed more funding for small business, Karen Kerrigan, president of the Small Business & Entrepreneurship Council told Inc. at the end of June Republicans are starting to line up in support.